Description
An Australian resident taxpayer (the taxpayer) enters into an arrangement with a tax scheme promoter involving the use of offshore entities and structures in Samoa or other low tax jurisdictions. The arrangement involves the transfer of funds offshore as artificial expenses for services purportedly provided by the promoter or an associated offshore entity. 2. This arrangement may be used for two purposes: a. To generate deductions: i. The taxpayer claims a deduction (the initial deduction) for the expenditure that has purportedly been incurred. ii. The promoter or an associate subsequently returns the funds to the taxpayer through the use of purported loan arrangements or the use of offshore debit or credit cards. iii. The taxpayer may seek further deductions in respect of interest on the purported loan used to effectively repatriate the funds. Frequently, the payment of purported interest is returned to the taxpayer, minus a small fee, as a further advance on the loan. This has the effect of increasing the loan balance and the amount of deductions in respect of purported interest over time. b. To conceal receipt of income or ownership of assets i. An offshore entity may also be used to enable the taxpayer to hold assets offshore, while concealing the beneficial ownership of those assets and the income that may be generated from those assets. ii. In some cases, the offshore entity may generate profits or gains offshore (for example by offshore passive investments) and/or in Australia (for example by trading in shares on the Australian Stock Exchange). These profits or gains are returned to the offshore entity or entities in Samoa or another low tax jurisdiction, and then transferred to another entity or entities in Samoa connected to the promoter. iii. These funds may be held offshore indefinitely, transferred to the taxpayer through the use of purported loan arrangements, or accessed through the use of debit or credit cards.